Financial Results

04

Main financial indicators

€ million, except key ratios and share data	2022	2021	2020	2019	2018
Sales	54,56	53,29	51,72	63,42	62,78
Gross profit	16,90	20,58	22,23	33,95	34,19
Operating profit before depreciation and amortisation (EBITDA)	18,14	25,30	28,07	38,18	32,73
Operating profit	11,32	18,78	21,78	32,07	26,94
Operating profit – main business	10,33	17,52	21,32	31,19	26,22
Profit before taxes	10,65	18,40	21,34	31,30	25,95
Net profit	8,41	16,17	16,73	27,76	24,15
Gross profit margin %	30,97	38,61	42,98	53,53	54,45
EBITDA margin %	33,24	47,47	54,27	60,21	52,13
Operating profit margin %	20,75	35,24	42,12	50,57	42,91
Profit before taxes margin %	19,51	34,52	41,27	49,36	41,34
Net profit margin %	15,41	30,33	32,35	43,77	38,47
ROA %	3,30	6,32	6,45	10,83	10,10
Debt to total assets %	56,26	54,94	56,09	56,05	58,85
ROE %	7,43	14,20	14,69	25,43	25,61
Current ratio	1,24	2,83	3,85	5,48	5,36
Number of full-time equivalent employees, at the end of the year	333	333	332	314	296
Share price, at the end of the year	12,54	14,48	13,25	11,70	9,60
Share capital	12,00	12,00	12,00	12,00	12,00
Earnings per share	0,42	0,81	0,84	1,39	1,21
Dividend per share	n/a*	0,65	0,65	1,00	0,75
Cash balance, at the end of the year	12,65	36,56	44,51	64,78	61,77
Investments to fixed assets	25,13	15,38	19,42	16,09	10,40

EBITDA: Operating profit + depreciation and amortization

Gross profit margin: Gross profit / Sales

EBITDA margin: EBITDA / Sales

Operating profit margin: Operating profit / Sales

Profit before taxes margin: Profit before taxes / Sales

Net profit margin: Net profit / Sales

ROA: Net profit /Average Total assets for the period

Debt to Total capital employed: Total liabilities / Total capital employed

ROE: Net profit / Average Total equity for the period

Current ratio: Current assets / Current liabilities

Main business: water services related activities, excl. connections profit and government grants,

construction services, doubtful debt

*Dividends for 2022 have not been declared at the time of issuing the report.

Sales

Sales in 2022

54.56 mln

In 2022 the Group’s total sales were €54.56 million, showing an increase of 2.4% or €1.26 million year-on-year. Sales from water services for twelve months of 2022 were 48.89 million, increasing by 8.5% or €3.83 million year-on-year. 89.6% of sales comprise of sales of water services within and outside of the service area, 8.8% from construction services and 1.6% from other services.

Sales

€ thousand	2022	2021	2020	Variance € 2021/2022	Variance % 2021/2022
Water supply service	8 380	8 097	8 106	283	3,5%
Wastewater disposal service	12 406	12 000	12 048	406	3,4%

Total from private customers	20 786	20 097	20 154	689	3,4%
Water supply service	8 260	7 115	7 209	1 145	16,1%
Wastewater disposal service	8 480	7 299	7 417	1 181	16,2%

Total from commercial customers	16 740	14 414	14 626	2 326	16,1%
Water supply service	1 599	1 631	1 593	-32	-2,0%
Wastewater disposal service	3 525	3 422	3 298	103	3,0%
Stormwater disposal service	193	256	291	-63	-24,6%

Total from outside service area customers	5 317	5 309	5 181	8	0,2%
Stormwater treatment and disposal and fire hydrants service	4 643	4 010	4 588	633	15,8%
Overpollution charges and discharging	1 403	1 225	1 250	178	14,5%

Total from water services	48 889	45 055	45 800	3 835	8,5%
Construction services	4 809	7 328	5 222	-2 519	-34,4%
Other services	860	911	695	-51	-5,6%

Total revenue	54 558	53 294	51 717	1 264	2,4%

Cost of goods and services sold and gross profit

In 2022 the cost of goods and services sold amounted to €37.66 million, increasing by 15.1% or €4.95 million compared to the equivalent period in 2021. Total direct production costs (water abstraction charges, chemicals, electricity, and pollution tax expenses) amounted to €13.58 million, showing a 57.8% or €4.97 million increase compared to the equivalent period in 2021. Changes in direct production costs came from a combination of changes in prices and in treated volumes:

Chemicals costs increased by 22.8% to €2.24 million, driven mainly by on average an 23.0% higher price of methanol, accompanied by 119.6% higher usage of polymer used in wastewater treatment, worth -€0.16 million and -€0.21 million accordingly. Higher costs from wastewater treatment were partly balanced by 43.6% lower usage of antifoaming agent, worth +€0.04 million.

Expenses for electricity increased by 100.2% or €4.62 million resulting in costs worth of €9.23 million due to on average an 61.6% higher electricity price.

Other costs of goods sold (staff costs, depreciation, construction and asphalting services costs and other costs of goods sold) amounted to €24.07 million, being on the same level compared to 2021. The changes in other costs of goods sold were mainly driven by 36.8% or €2.20 million lower expenses related to construction services and 13.6% higher staff costs.

The Group’s profit before taxes for the 2022 gross profit for the 2022 was €16.90 million, showing a decrease of 17.9% or €3.68 million compared to the comparative period of 2021.

€ thousand	2022	2021	2020	Variance € 2021/2022	Variance % 2021/2022
Water abstraction charges	-1 288	-1 281	-1 237	-7	-0,5%
Chemicals	-2 238	-1 822	-1 567	-416	-22,8%
Electricity	-9 234	-4 612	-3 256	-4 622	-100,2%
Pollution tax	-823	-894	-990	71	7,9%

Total direct production costs	-13 583	-8 609	-7 049	-4 974	-57,8%
Staff costs	-8 229	-7 243	-7 247	-986	-13,6%
Depreciation and amortisation	-5 930	-5 725	-5 521	-205	-3,6%
Construction services	-3 802	-5 988	-4 256	2 186	36,8%
Other costs of goods sold	-6 116	-5 150	-5 418	-966	-19,1%

Total other costs of goods/services sold	-24 077	-24 106	-22 442	29	0,1%

Total cost of goods/services sold	-37 660	-32 715	-29 491	-4 945	-15,1%

Other income and expenses

Other income and expenses in 2022 amounted to a net loss of €0.48 million compared to net income of €3.10 million in 2021. The change was mainly impacted by freezing the reversing of provision in Q4 2021, that was formed for possible third-party claims in 2019.

Operating profit

The Group’s operating profit for 2022 amounted to €11.32 million, being 39.7% or €7.46 million lower than in the corresponding period of 2021, being mainly impacted by higher electricity and chemicals cost and change of provision for the possible third-party claims that was frozen in Q4 2021. Eliminating the effect of the change of provision for the possible third-party claims the operating profit for 2021 would have been €15.17 million, that is 25.4% higher compared to same period of 2022.

Financial expenses

The Group’s net financial income and expenses have resulted a net expense of €0.67 million, compared to net expense of €0.38 million in the twelve months of 2021. The increase was impacted by slightly higher interest expense on loans at the end of a year and negative interest on bank accounts in the beginning of a year.

Profit before taxes and net profit

The Group’s profit before taxes for the 2022 was €10.65 million, being 42.1% or €7.75 million lower than for the relevant period of 2021. The Group’s net profit for 2022 was €8.41 million, being 48.0% or €7.76 million lower than for the equivalent period of 2021. Eliminating the effect of the change of provision for the possible third-party claims the Group’s net profit for the 2021 would have been €12.56 million, showing a decrease for 2022 by 33.0% or €4.15 million year-on-year.

Statement of financial position

In 2022 the Group invested into fixed assets €25.13 million. As of 31/12/2022, non-current tangible assets amounted to €229.87 million,
the majority of which in the amount of €186.7 million was an investment in pipes (31/12/2021: €167.61 million). Total non-current assets amounted to €230.55 million (31/12/2021: €212.27 million).

Other income and expenses in 2022 the trade receivables, accrued income and prepaid expenses have shown a slight increase in the amount of €2.35 million to €8.99 million. An increase mainly derives by €2.04 million higher receivables from water and construction services. The collectability rate continues to be high at 99.85% compared to December 2021 when the collectability rate was the same.

Current liabilities have increased by €3.00 million to €18.49 million compared to the end of 2021, mainly deriving from investments related increase in prepayments of new connections.

Deferred income from connection fees has increased compared to the end of 2021 by €1.91 million to €39.15 million.

Provision for possible third-party claims is at the same level compared to the end of 2021 on €6.02 million.

The Group’s loan balance of €80.45 million has decreased by €3.63 million in 2022. Earlier NIB loan is being returned in 11 equal semi-annual payments. The weighted average loan interest risk margin as of 31/12/2022 is 3.0%.

The Group has total debt to assets level of 56.26%, in range of 54%-65%, reflecting the Group’s equity profile. In the comparative period of 2021, the total debt to assets ratio was at the same range, being 54.94%.

Investors

Tallinna Vesi is a listed company and its shares have been listed on Nasdaq Baltic market since 1 June 2005.

Shareholders by type as of 31 December 2022

Tallinn City

OÜ Utilitas

Foreign institutional investors

Local retail investors

Local institutional investors

Foreign retail investors

Dividends

ASTV aims to distribute 50-80% of the annual profit as dividends. In the Annual General Meeting held on 03/06/2022, the Supervisory Board proposed to pay out €0.65 per share from the 2021 profits. The pay-out is equal to 80% of earnings per share in 2021. The proposal was approved by the Annual General Meeting and the dividend pay-out was made on 29/06/2022.

Share price

As of 31/12/2022, the closing price of AS Tallinna Vesi’s share was €12.54, which is 13.40% lower (2021: +9.28%) compared to the closing price of €14.48 at the end of the previous year. During the 2022, the OMX Tallinn index dropped by 11.71% (2021: +48.92%).

In twelve months of 2022, 20,167 transactions were made with the Company’s shares (2021: 22,333 deals) during which 542 thousand shares or 2.7% of all shares changed owners (2021: 947 million shares or 4.7%).

The turnover of transactions amounted to €7.30 million, being €6.29 million lower than in the comparative period of 2021.

Activities of the subsidiary Watercom OÜ

Watercom delivered more sales and profit than ever before, and achieved the challenging target set for external profit. The biggest contribution to external profit came from the road construction activity, which for the first time outperformed the contribution from the pipe construction. In 2022, the company successfully launched a new manhole repair service and at the end of the year an ice pigging equipment was delivered, which allows to clean water pipes by applying the most innovative technique.

Pipe and road construction

The main activity of Watercom in 2022 was the construction of water and wastewater networks for developers, water companies and private individuals. As in previous years, the focus was on feasible construction projects and procurements in Tallinn and elsewhere in Estonia, mainly in Harju and Rapla counties.

Other services

During 2022, Watercom carried out several supervision contracts for various real estate developers in Tallinn and surrounding municipalities. Jet washing and transportation services are mostly provided within the Group but are also available to external customers. Proactive jet washing program has helped to keep much better control over the number of sewer blockages.